Should You Cancel Your Balance Transfer Credit Card?

If the card you used for a balance transfer isn't useful anymore, you might wonder, "Should I cancel that card?" The answer for most people is that you should keep your card even after you've paid your balance in full or the 0% introductory period ends. Keeping the card open helps your credit score, so even if it's in a drawer collecting dust, it may still be helpful for your finances.

Consider canceling the card if it carries an annual fee, you're having trouble staying disciplined with your spending or the extra credit line is a liability to your debt plans.

The best balance transfer cards on our list offer no annual fees. If your card doesn't have a yearly fee, it shouldn't cost you anything to maintain. Even if your balance transfer card isn't your everyday spending card or lacks rewards, keeping your balance transfer credit card can also offer the following benefits:

If you decide to keep your card, use it to pay for things like gas and minor expenses. Using your card from time to time will prevent your card issuer from closing your account due to inactivity. That will have the same impact as canceling your credit card.

While keeping the balance transfer credit card is typically a better option, here’s when you should consider canceling:

Canceling a credit card decreases your total credit availability, potentially increasing your credit utilization ratio, especially if you have outstanding balances on other cards. This can negatively impact your credit score.

This might also affect the diversity of your credit (credit mix) and shorten the average age of your credit accounts (length of credit history), both of which can lower your credit score.

If you have a good credit score and a long credit history, canceling a card will not have as big of an impact on your credit score as it would on people with lower credit scores or shorter credit histories. You can take some steps to reduce the effect of shutting your account.

To minimize the impact on your credit score, you can apply for a new card before canceling the old one. This approach helps maintain your total available credit. Note, however, that applying for a new card triggers a hard inquiry, which could temporarily lower your score.

Avoid canceling cards when you're about to apply for major loans like mortgages or auto loans. Instead, choose a stable financial period when you're not seeking new credit.

Work on lowering your credit utilization rate before canceling your card. Lower credit utilization across all accounts can help buffer the impact of losing one credit line. It also helps if you're up to date with all your payments, as this improves your credit score, which may offset the negative effect of closing a card.

If you're considering canceling your credit card because it lacks benefits, consider upgrading it instead.

Upgrading, or a product change, means asking your current card issuer for a new card with better rewards and features. Since you're already a customer, upgrading usually doesn't involve a hard credit check, which is good news for your credit score. Plus, it won't affect the average age of your credit history.

Be sure to check your card issuer's terms and conditions when it comes to product changes. Some card issuers limit the credit card options you can upgrade to. You cannot upgrade from a personal credit card to a business credit card, and you usually won't qualify for any welcome bonus.

You might have some lingering questions as you navigate your financial journey post-balance transfer. To help you make informed decisions, we've compiled a list of frequently asked questions.